The Company paid the FTB those taxes, and then sued for a refund.

FORBES: Nevada Corporation Solely Owned By California Resident Dodges California Taxes

The FTB also dictates what your temporary or transitory status will be.

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The California Franchise Tax Board (FTB) held that a Nevada Company was commercially domiciled in California because it was owned by the California resident.

FORBES: Nevada Corporation Solely Owned By California Resident Dodges California Taxes

If a taxpayer is required to make electronic payments but pays by other means, FTB will assess a penalty equal to 1 percent of the amount paid.

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Recently, inaction by the California Franchise Tax Board (FTB) gave all Silicon Valley entrepreneurs a clear signal: make your residence in California a temporary or transitory one.

FORBES: For Entrepreneurs, California's Tax Code Becomes The Roach Motel

But the business had better be prepared to litigate the issue against the FTB, meaning that this probably only makes sense for very profitable businesses for whom it will make sense to litigate.

FORBES: Nevada Corporation Solely Owned By California Resident Dodges California Taxes

"The United States will take strong measures to protect its financial system from this kind of illicit activity, and we urge financial institutions around the world to be particularly wary of the risks of doing business with FTB, " he said.

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Franchise Tax Board (FTB).

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